Ballad of a FINRA Man

On September 3,2015, during the course of an investigation into allegations that Mohlman engaged in unapproved and undisclosed private securities transactions, FINRA requested, pursuant to FINRA Rule 8210, that Mohlman appear for OTR testimony on September It, 2015. 

As stated in a September 9,2015 email and by this agreement, Mohlman, through his counsel, acknowledges that he received FINRA's request for his OTR testimony and that he will not appear for the OTR testimony at any time. By refusing to appear and provide OTR testimony as requested, Mohlman violates FINRA Rules 8210 and 2010.

Side Bar:  The 2015 FINRA AWC states that Mohlman's middle name is "Allan" with a second "a." but the subsequent court documents state that it is "Allen" with an "e." Also, FINRA's online BrokerCheck records as of October 15, 2020, disclose his middle name as "Allan."

https://files.brokercheck.finra.org/individual/individual_4431845.pdf] 

13. While a representative for Questar, the Plaintiff had conversations with approximately six family members and friends concerning WMA Enterprises, Inc. ("WMA"). Plaintiff did not attempt to sell investments with WMA nor did he receive compensation of any sort from WMA, 

14. Plaintiff learned that WMA was a Ponzi scheme from the television news on October 31, 2014, 

15. Plaintiff immediately personally informed all persons who had invested in WMA of this fact, 

16. Plaintiff himself had invested $238,111.11 with WMA and lost a substantial amount of money, 

17. Plaintiff fully cooperated with investigations by the FBI and IRS and was himself listed as a victim of the WMA scheme, 

18. Plaintiff paid all bankruptcy court attorney's fees for those persons to whom he had mentioned WMA, 

19. An investigation of Plaintiff was commenced by Defendant FINRA in 2014, . . .

suggested that this matter be resolved by having Plaintiff state that he would not testify at this interview, 

29. Plaintiff's Counsel accepted this suggestion and submitted an Acceptance, Waiver and Consent (AWC) to Defendant FINRA at FINRA's, Schroeder, Brown and the Does' direction, 

30. On September 21, 2015 Plaintiff was barred from the securities industry by Defendant FINRA, 

34. Due to the fraud committed by the Defendants in inducing the Plaintiff to fail to testify at his second interview, thus fraudulently avoiding the requirement that they consider the mitigation factors in the Plaintiffs case, the Plaintiff has incurred actual damages in the amount of $90,000 in legal fees, $50,000.00 in residual fees for business he could not refer due to securities industry bar in 2015 which resulted in his inability to get appointed as a non-securities licensed Professional Alliance Partner, $200,000.00 due to inability to get appointed with several insurance carriers since the 2015 bar and clients refusing to conduct business with him due to his bar, $48,000.00 reputation rehabilitation specialist fees, $3000.00 for PTSD therapy since March, 2015 through EMDR therapy with a psychotherapist and currently in month 3 of IASIS Therapy for PTSD and anxiety, and punitive damages in the amount of $500,000.00.

Congress set forth the exclusive means for review of final actions in FINRA disciplinary proceedings when it enacted the Exchange Act, with its system of appeal of FINRA decisions to the SEC, and exclusive review by the United States Courts of Appeals. 15 U.S.C. § 78y. Congress did not provide for seeking damages or equitable relief in state courts or federal district courts. 

Plaintiff asks this Court to set aside his final regulatory settlement. When Plaintiff executed the AWC, he waived his rights to exercise these administrative remedies, or to take any action to dispute its findings or "create the impression that [it] is without factual basis." AWC, p. 4. Plaintiff's waiver of his administrative remedies by executing the AWC does not eliminate the existence of the administrative remedies, nor does it create subject matter jurisdiction for him to challenge the AWC in this Court. Congress foreclosed this approach when it enacted the Exchange Act, with its system of appeal of FINRA decisions to the SEC, and exclusive review by the United States Courts of Appeals. 15 U.S.C. § 78y. 

FINRA is immune "from suit for conduct falling within the scope of the SRO's regulatory and general oversight functions." D'Alessio v. New York Stock Exch., Inc., 258 F.3d 93, 105 (2d Cir. 2001) (holding that a self-regulating authority like FINRA is "immune from liability for claims arising out of the discharge of its duties under the Exchange Act"); accord: Lucido v. Mueler, No. 08-15269, 2009 U.S. Dist. LEXIS 89775, *19 (E.D. Mich. Sep. 29, 2009) (granting FINRA's motion to dismiss, in part, on FINRA's immunity from claims seeking to expunge registered representative's criminal record from FINRA's CRD database), affd 2011 U.S. App. LEXIS 17632 (6th Cir. 2011); Standard Inv. Chartered, Inc. v. NASD, 637 F.3d 112, 116 (2d Cir. 2011); In re Series 7 Broker Qualification Exam Scoring Litig., 548 F.3d 110, 114 (D.C. Cir. 2008) (affirming dismissal of class action against NASD and finding that "[w]hen [a self-regulating authority] acts under the aegis of the Exchange Act's delegated authority, it is absolutely immune from suit for the improper performance of regulatory, adjudicatory, or prosecutorial duties delegated by the SEC"); DL Capital Group LLC v. NASDAQ Stock Market, Inc., 409 F.3d 93, 97 (2d Cir. 2005) (holding that when a self-regulating authority engaged in conduct consistent with the powers delegated to it pursuant to the Exchange Act and the regulations and rules promulgated thereunder, self-regulating authority is immune from suit); Scher v. NASD, 386 F. Supp. 2d 402, 406 (S.D.N.Y. 2005) (dismissing complaint against NASD and related entities because action barred by immunity granted to NASD "for conduct falling within the scope of the [NASD's] regulatory and oversight functions") (citation omitted), affd, 2007 U.S. App. LEXIS 4692 (2d Cir. 2007); P'ship Exch. Sec. Co. v. NASD, 169 F.3d 606, 608 (9th Cir. 1999) (holding that the NASD was protected by immunity for its actions taken "under the authority delegated to it by the Exchange Act"); Sparta Surgical Corp. v. NASD, 159 F.3d 1209, 1215 (9th Cir. 1998) ("when Congress elected 'cooperative regulation' as the primary means of regulating the over-the-counter market, the consequence was that self-regulatory organizations had to enjoy freedom from civil liability when they acted in their regulatory capacity"); American Benefits Group, Inc. v. NASD, No. 99 Civ. 4733, 1999 U.S. Dist. LEXIS 12321, *24 (S.D.N.Y. Aug. 10, 1999) (holding that "the NASD is entitled to absolute immunity when exercising its authority within the scope of its official duties").

FINRA's regulatory immunity extends to its employees acting within the "aegis of the Exchange Act's delegated authority." P'ship Exch. Sec. Co., 169 F.3d at 608 (citation omitted). Because FINRA can act only through its employees, FINRA employees may rely upon and invoke immunity. Standard Inv. Chartered, 637 F.3d at 115 ("[t]here is no question" that officers of a self-regulating authority are entitled to immunity for actions taken in discharging their regulatory responsibilities); Hurry v. Fin. Indus. Regulatory Auth., No. CV-14- 02490-PHX-ROS, 2015 U.S. Dist. LEXIS 180020, at *15 (D. Ariz. Aug. 5, 2015) (dismissing claim against FINRA employee for actions taken in his role as a FINRA employee).

There is no recognized right to sue FINRA for failing to consider mitigating factors. Moreover, entering into settlements of disciplinary actions falls within FINRA's regulatory authority. 15 U.S.C. § 78o-3(i). This is the precise conduct to which a self-regulating authority's immunity is intended to apply. D'Alessio, 258 F.3d at 105. This action against Defendants is barred by FINRA's absolute regulatory immunity, and this case will be dismissed.

Moreover, neither the Exchange Act, nor any other provision of the federal securities laws provides for a cause of action against a self-regulating authority (or its employees) for acts or omissions in connection with its duties as a securities regulator. To the contrary, courts routinely hold that no private right of action exists against a self-regulating authority like FINRA for its regulatory acts. In re Series 7, 548 F.3d at 114 ("By specifically adopting an appeals process which does not provide monetary relief, Congress has displaced claims for relief based on state common law"); Desiderio, 191 F.3d at 208; MM&S Fin., Inc. v. NASD, 364 F.3d 908, 911-912 (8th Cir. 2004) ("the Exchange Act does not create a private right of action against the NASD defendants for violating their own rules" and a party's attempt to bypass the absence of a private right of action by asserting a claim under state contract law is "fruitless"); Spicer v. Chicago Bd. of Options Exchange, Inc., 977 F.2d 255, 260 (7th Cir. 1992); Matyuf v. NASD Dispute Resolution, Inc., No. 04-540, 2004 U.S. Dist. LEXIS 25174, *10 (W.D. Pa. Oct. 4, 2004); In re Olick, 99-cv-5128, 2000 U.S. Dist. LEXIS 4275, *11 (E.D. Pa. Apr. 4, 2000) (a party "may not maintain a private cause of action against the NASD under the Exchange Act, or at common law, for regulatory actions taken by the NASD"); Feins v. AMEX, 81 F.3d 1215 (2d Cir. 1996); Meyers v. NASD, No. 95-cv-75077, 1996 U.S. Dist. LEXIS 6044, *14 (E.D. Mich. Mar. 29, 1996) (court dismissed action against FINRA finding allegations were "an unsuccessful attempt to create a private cause of action for the violation of the NASD rules where none exists"); Jablon v. Dean Witter & Co., 614 F.2d 677, 681 (9th Cir. 1980); Pinnacle Sec. Inv. Assocs., L.P. v. AMEX, 946 F. Supp. 290, 293-94 (S.D.N.Y. 1996); Shahmirzadi v. Smith Barney, Harris Upham & Co. Inc., 636 F. Supp. 49, 52 (D.D.C. 1985). 

Plaintiff did not exhaust his administrative remedies under the FINRA Rules and the Exchange Act. While Plaintiff waived his procedural rights when he executed the Letter, Plaintiff still could have applied for review by the National Adjudicatory Council and the SEC. See Bruce Zipper, Exchange Act Release No. 34-81788, 2017 WL 11433739 (Sep. 29, 2017) ("We dismiss Zipper's application for review because Zipper's [Letter] contains a valid and enforceable appellate waiver . . . ."). Plaintiff instead curiously filed suit in State court four years after executing the Letter, requesting damages for FINRA's alleged fraudulent failure to consider mitigating factors^.3 [R. 4] 

Plaintiff cites to Saad v. S.E.C., 718 F.3d 904 (D.C. Cir. 2013), for the proposition that we may set aside the final decision because FINRA did not consider mitigating factors in sanctioning him to a lifetime bar from the securities industry. [Pl.'s Br. at 8] While the Saad court emphasized the importance of considering mitigating factors in administering sanctions, the plaintiff there filed a petition in the United States Court of Appeals for the District of Columbia after appealing to the National Adjudicatory Council and petitioning the SEC for review. Id. at 906, 913. Thus, the plaintiff in Saad followed the administrative procedure under the Exchange Act, which Plaintiff did not do here. Saad is therefore inapposite. Plaintiff failed to exhaust the available administrative remedies. Whether his failure to exhaust administrative remedies constituted a jurisdictional bar-as opposed to noncompliance with a non-jurisdictional rule-is a question we need not answer. See generally Avocados Plus Inc. v. Veneman, 370 F.3d 1243, 1247-49 (D.C. Cir. 2004) (exhaustion can be jurisdictional or non-jurisdictional). Even if the requirement is non-jurisdictional here, Plaintiff forfeited any argument in favor of an exception that might have applied by failing to raise it before the district court.⁴ See id. at 1247 (non-jurisdictional exhaustion can be excused but "[i]f the statute does mandate exhaustion, a court cannot excuse it."); First Jersey, 605 F.2d at 696-700 (analyzing exceptions to the exhaustion rule in a challenge to FINRA disciplinary action). Because we conclude that Plaintiff failed to exhaust the available administrative remedies, we do not address the merits of the case. See Citadel Sec., LLC, 808 F.3d at 701 (affirming the district court's dismissal for failure to exhaust administrative remedies and not addressing the merits of absolute immunity, lack of private right of action, or failure to state a claim).

= = = = =

Footnote 3: Pursuant to its Sanction Guidelines, FINRA is required to consider aggravating and mitigating factors when determining sanctions against its members. See SANCTION GUIDELINES (2019), available at https://www.finra.org/rules-guidance/oversight-enforcement/sanction-guidelines. 

Footnote 4: We acknowledge that other circuits have labeled the exhaustion requirement "jurisdictional" in the context of challenges to FINRA disciplinary proceedings. See, e.g., Swirsky, 124 F.3d at 62; First Jersey, 605 F.2d at 700. However, that practice began before the Supreme Court's recent observations that courts-including the Supreme Court-have traditionally been too quick to use that term to describe inflexible rules that are not truly jurisdictional. See, e.g., Arbaugh v. Y&H Corp., 546 U.S. 500, 510 (2006) (" 'Jurisdiction,' this Court has observed, 'is a word of many, too many, meanings.' This Court, no less than other courts, has sometimes been profligate in its use of the term.") (quoting Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 90 (1998)); Kontrick v. Ryan, 540 U.S. 443, 455 (2004) ("Clarity would be facilitated if courts and litigants used the label 'jurisdictional' not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court's adjudicatory authority."). It is unclear whether the exhaustion requirement applicable in this case is properly considered jurisdictional, and we decline to make that determination here, where we need not and the parties have not briefed the issue. Cf. Hoogerheide v. IRS, 637 F.3d 634, 636 (6th Cir. 2011) ("In the aftermath of Arbaugh, it no longer is appropriate to treat the exhaustion requirements for bringing a § 7433 claim as jurisdictional. Mandatory though the exhaustion requirement in § 7433(d) may be, it is not jurisdictional.").

• FINRA
• AWC
• OTR
• Mohlman
• SDOH
• 6Cir
• Administrative Remedies
• Exhaustion of Administrative Remedies
• Immunity
• Private Action
• BrokeAndBroker
• Bill Singer